News

North Dakota’s Energy Sector – The Gift That Keeps on Giving

Any governor would be delighted to have the “problem” of grossly underestimating projected revenue growth, even after enacting tax-cutting reforms. After all, logic would dictate that reductions in taxes (whether they be personal income taxes, corporate taxes, or otherwise) should result in revenue decreases, not increases. But traditional logic plays little part in this story. We are talking about an anomaly: North Dakota, a state where revenue projections always seem to be underestimated. In 2012, the variance between actual revenue and forecasted revenue was 28.5 percent, or more than $344 million. The discrepancy may be startling, but the explanation is clear: More people and new businesses are flowing in, as more oil and natural gas are flowing out, and all are on a steep vertical trajectory.

While agriculture, forestry, fishing, and hunting make up a healthy portion of North Dakota’s revenues, these industries pale in comparison to the 800-pound gorilla in the room: namely, the state’s energy sector, including ancillary growth in new construction, real estate, technical services, support services, transportation, and IT operations.

Needless to say, if you are unemployed and don’t mind the smell of oil or sub-zero weather, then western North Dakota is the place to go. How about an average family income of $69,600, with more than 2,500 open jobs at any given time? It is apparent that many people are investing in North Dakota’s future, and as a result, we have those pesky revenue underestimates!